Real estate has consistently been one of the best long-term investments people can make to build wealth. However, many potential investors find it difficult to enter the real estate investment world as they are unfamiliar with financing options and opportunities. This is where Debt Service Coverage Ratio (DSCR) loans can provide an accessible way for investors to get started on financing investment properties. In this post, we’ll discuss DSCR loans and explore what they are, how they work, and the opportunities they offer to both clients and agents.
Debt Service Coverage Ratio is a financial metric used to assess the ability of a property to generate income that can cover its debt obligations. Unlike traditional mortgage loans where the borrower’s income and creditworthiness are most important factors, DSCR loans primarily focus on the property’s income potential. This means you are qualifying the property’s ability to generate income rather than the income of a borrower. The DSCR is calculated by dividing the property’s Net Operating Income (NOI) by its total debt service, which is the total mortgage payment on the loan. A DSCR above 1.0 typically indicates that the property’s income can comfortably cover its debt obligations and is what a lender would like to approve. Higher DSCR values signify greater financial security. The formula is as follows:
DSCR = Net Operating Income / Total Debt Service.
DSCR loans offer a relatively low barrier to entry for new investors, enabling them to enter the real estate investment world without the need of conventional financing that typically has more stringent requirements. With the help of a Homeseed loan advisor and their partnering real estate agents, investors can find properties on the market that will allow them to benefit from both passive income generated by the property and long term equity growth associated with appreciation. Historically, real estate has proven to be a sound investment choice and DSCR loans provide a means to build wealth.
Real estate agents can use a DSCR loan through Homeseed to help sellers improve their property’s appeal by showing income potential. By identifying properties with strong DSCR potential, agents can provide valuable opportunities to clients who are looking to invest their money wisely for long-term growth. Working in tandem with a Homeseed loan advisor will undoubtedly allow them to provide a more comprehensive service to all of their clients.
To illustrate the power of DSCR loans with a real-world example, we recently had a client who wanted to do a cash-out refinance on an investment property to fund additional investments. After ordering an appraisal with a rent schedule, the licensed appraiser determined that the home could generate on average of $255/night for a total monthly income of about $7,700. With only a mortgage payment of about $4,000, the property’s DSCR would be roughly 1.4 and indicated that it had strong financial viability. The DSCR loan also provided better interest rates compared to hard money loans and the funds will allow the client to expand their real estate portfolio.
Homeseed continues to look for ways to provide value for our clients that extends past the transaction as their home is likely the largest asset they will ever own. In fact, by the time the average American retires, 83% of their retirement will come from their home equity. This makes it even more important to stay informed on your home’s equity and potential financial opportunities, which Homeseed allows you to do with our home equity management tool, Homebot.
For homeowners, Homebot presents a transformative approach to home equity management. Through personalized dashboards and regular email updates, homeowners gain valuable insights into their property’s market value, trends, and potential equity growth. This empowers them to make educated choices about refinancing, leveraging their properties, or making strategic financial moves. The platform’s ability to break down real estate and financial information into user-friendly formats not only ensures homeowners stay well-informed, but also helps them secure their financial futures, especially considering the significant proportion of their retirement tied up in their home equity.
CLICK HERE to receive a monthly Homebot Report for your home!
Investing in real estate has always been an attractive opportunity for those seeking to build wealth with quality investments. However, many potential investors find themselves daunted by the barriers that come with traditional financing options. That’s where the Creative Home Equity Product Suite comes into play, helping you find creative ways to finance and build your real estate portfolio. The Creative Home Equity Product Suite is designed to empower clients with the means to turn their real estate aspirations into a reality. It comprises four main product categories, each catering to specific investment goals:
Investor: The Invest product is tailored to investors looking to acquire additional income properties. Whether you want to purchase a rental property or expand your real estate holdings, this financing option allows you to seize opportunities and grow your portfolio.
Vacation: Have you always dreamed of owning a second home, a cozy retreat away from the hustle and bustle of everyday life? With the Vacation product, you can now make that dream come true. Whether it’s a cabin in the mountains or a beachside bungalow, Homeseed offers flexible financing options tailored to your needs.
Profit: For those with an eye for potential, the Improve product provides funding for fix-and-flip properties. Whether you’re a seasoned house flipper or just starting, this option gives you the financial flexibility to get the most out of your investment.
Improve: Renovations can breathe new life into a property and substantially increase its value. The Profit product is designed to fund renovation projects, making it an ideal choice for those looking to enhance their current real estate assets.
One of the standout features of the Creative Home Equity Product Suite is the flexibility it offers. Unlike traditional lending institutions that may have rigid terms and strict eligibility criteria, Homeseed understands that every investor’s journey is unique. The terms of each product are crafted to suit the specific requirements of the client, ensuring that they can seize opportunities and navigate challenges with ease.
Homeseed is committed to empowering clients from all walks of life to achieve their real estate goals. Traditional lending institutions often present numerous obstacles that can deter potential investors. The Creative Home Equity Product Suite of loan programs offers more ways to qualify, ensuring that the doors to real estate investment are open to more people than ever before. Whether you’re a first-time investor or a seasoned pro, Homeseed is here to support your journey in building your real estate portfolio!
Introducing Homeseed 360: A Revolutionary Mobile App To Simplifying Your Homebuying Journey
The mortgage process to purchase your dream home just got a whole lot easier with the launch of the Homeseed 360 Mobile App. This innovative mortgage app is designed to streamline the entire homebuying process, empowering our clients and agents with an array of powerful features and tools right at their fingertips.
One of the standout features of Homeseed 360 is its intuitive loan payment calculator, allowing users to effortlessly determine their monthly mortgage payments. No more complex calculations or guesswork – simply input the necessary details, such as loan amount, interest rate, and loan term, and let Homeseed 360 do the rest. Additionally, clients can view detailed amortization and loan information for various loan programs, gaining valuable insights into their mortgage structure and payment schedule.
Homeseed 360 takes convenience to the next level by enabling users to securely upload important documents directly from their mobile devices. Whether it’s financial statements, tax returns, or proof of income, clients can now easily submit required documentation with just a few taps, saving them valuable time and eliminating the hassle of manual paperwork. Furthermore, the application allows for seamless document sharing where loan advisors can quickly issue pre-approval letters for clients looking to move fast on their purchase.
Homeseed 360 also allows you to stay on top of your mortgage journey effortlessly by providing timely task notifications and ensuring users never miss an important deadline or milestone. From submitting documents to scheduling appraisals, Homeseed 360 keeps clients informed and organized, minimizing stress and maximizing efficiency. Agents will receive live updates of the loan process as well so they can follow along as the transaction progresses.
In a world where technology is revolutionizing industries, Homeseed 360 stands out as a game-changer in the home lending space. By combining powerful features like loan payment calculations, document uploads, seamless sharing, and task notifications, this innovative mobile app is empowering homebuyers to take control of their mortgage process like never before. Say goodbye to the complexities and uncertainties of traditional mortgage applications – Homeseed 360 is here to simplify and streamline your homebuying journey.
Maintaining a low debt-to-income ratio is crucial when applying for a mortgage due to its significant impact on your financial health and loan approval chances. The debt-to-income ratio is a measure of the percentage of your monthly income that goes toward paying off debts, including credit card balances, student loans, car loans, and your proposed mortgage payment. Lenders carefully consider this ratio as it provides an indicator of your ability to manage additional debt responsibly. By keeping your debt-to-income ratio low, you demonstrate financial stability and a higher capacity to handle mortgage payments. This lower ratio not only increases the likelihood of mortgage approval but also allows you to secure more favorable loan terms and interest rates. Overall, maintaining a healthy debt-to-income ratio is essential for a smooth mortgage application process and a solid foundation for your future homeownership journey.
Homeseed is now offering a Buy Before You Sell program for current homeowners who are looking to purchase a new residence. One of the main advantages is that it can provide flexibility and alleviate some of the stress homeowners face when purchasing a new home. The program allows homebuyers to move quickly on the purchase of the new home rather than worrying about selling their current residence. Additionally, it strengthens their offer on a new property as they are not contingent on the sale of their current home. This can be especially advantageous in a competitive real estate market, where buyers may face multiple offers on a property. Furthermore, this loan program can provide buyers with a bridge loan to help cover the down payment on the new purchase or to make repairs to the departing residence.
Homeowners in the United States have seen a record-high increase in home equity. According to MBS Highway, 76% of homeowners have at least $100,000 of equity in their homes while the median priced home has gained an average of $190,000 in appreciation in the last 10 years. This further emphasizes the immense value and wealth that homeownership provides for an individual. Homeowners can also take advantage of this equity by using it for a variety of purposes, such as home improvements, debt consolidation, or funding other financial investments.
Two popular options for accessing home equity are home equity lines of credit (HELOCs) and cash-out refinances. HELOCs allow homeowners to borrow against their home equity as needed, similar to a credit card. They often come with variable interest rates and typically have a lower upfront cost than a cash-out refinance. On the other hand, a cash-out refinance replaces the homeowner’s existing mortgage with a new, larger loan. The homeowner receives the difference between the old and new loans in cash, which can be used for any purpose. Cash-out refinances usually come with a lower fixed interest rate and a higher upfront cost than a HELOC. While both options can provide access to the home’s equity, your unique situation will determine which product is best for you. Contact us today to learn more!
A credit score is one of the critical factors that lenders consider when determining whether to approve a mortgage application. The score reflects a borrower’s creditworthiness and financial history, which indicates the likelihood of paying back the loan on time. A high credit score is an indicator of a responsible borrower and shows that the borrower has a history of making timely payments on their debts. A low credit score can make it challenging to obtain a mortgage, or the borrower may receive higher interest rates and less favorable loan terms.
Furthermore, a high credit score not only makes it easier to obtain a mortgage but can also help borrowers secure a more affordable mortgage loan. Lenders offer lower interest rates and better terms to borrowers with higher credit scores, which can result in significant savings over the life of the loan. Even a small difference in interest rates can add up to thousands of dollars in savings over the long term. Therefore, it is crucial to maintain a high credit score by consistently paying bills on time, keeping credit card balances low, and avoiding taking on new credit until after the mortgage has been secured. Check out the flyer below for more tips on maintaining and keeping your credit score high!
ARE YOU INTERESTED IN BECOMING A REAL ESTATE INVESTOR?
Becoming a real estate investor can be a wise financial decision for homeowners looking to build long-term wealth. With the investor cash flow (DSCR) loan program that Homeseed offers, it has become easier than ever to finance investment properties. Our DSCR loan program does not require you to qualify personal debt or income, and it simply looks at the property’s cash flow to decide on its approval. Real estate has historically proven to be a stable and profitable investment, and DSCR loan programs make it accessible to clients interested in becoming investors. Attached is a flyer with more information. Share or reach out with any questions!
Trigger leads are generated when a consumer’s credit report is accessed during a loan application process. Credit bureaus like Equifax, Experian, and TransUnion can sell the consumer’s information as trigger leads to other companies, and these companies will begin calling you multiple times to solicit business. It’s frustrating as Homeseed needs to request your credit scores from the credit bureaus for the purpose of a mortgage loan.
IS THIS LEGAL?
The sale of trigger leads is currently legal, but there is a proposed bill called the Trigger Leads Abatement Act of 2022 that aims to prohibit their creation and sale.
HOW DO I STOP THEM?
There is no way to completely stop trigger leads, but taking steps such as opting out of pre-approved credit offers can reduce them significantly.
Opt-Out of Phone Calls and Texts Visit www.optoutprescreen.com to register yourself for the Electronic Opt-Out for 5 years. You can also register yourself by calling 888-567-8688. Visit www.donotcall.gov and register up to 3 phone numbers. Be sure to click on the link emailed to you from email@example.com within 72 hours to confirm your registration.
Opt-Out of Email and Mail Offers Visit www.dmachoice.org and select Email Opt-Out Service to register up to 3 emails. Be sure to click on the link emailed to you within 30 days. You can also register up to 5 records for your household for 10 years. Please note they do charge a $4 admin fee for registration.
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